May 122017
 

An interview with Media scholar Jonathan Taplin, author of the new book Move Fast and Break Things, on the Pro-Market website poses some interesting questions about the direction of the digital economy and innovation as market power coalesces around the big four internet giants. 

This power is particularly marked in online media with Facebook and Google pocketing most of the global advertising spend which leaves little for content creators.

I kept coming back to these three—Google, Facebook, and Amazon. All have extraordinary market shares. Google has an 88 percent market share in search advertising and an 80-plus percent market share in Android. Amazon has a 74 percent market share in e-books, and Facebook controls 70-plus percent of mobile social media when you add Instagram, Messenger, and WhatsApp. What more empirical evidence does one need to prove concentration?

Over the past decade we’ve seen the power of the big four online gatekeepers growing although ironically Apple’s light seems to be dimming as the company’s innovative vision fades following Steve Jobs’ passing.

The monopoly problem is broader than just the tech industry though, as The Atlantic pointed out last year, market dominating corporations are suppressing innovation throughout the US. The problem is even greater in Australia and some other countries.

The rise of the monopolies shouldn’t be a surprise as the neo-liberal policies of the United States and most of the western world for the last 40 years have been largely focused on increasing the wealth and power of corporations and their managers. It’s fair to say those policies have been successful.

Where we go next is the big question. An economy dominated, and suffocated, by a handful of well connected and powerful corporations is not going to drive wealth creation, particularly in a world where more businesses functions are being automated.

One short term step may be to break up the monopolies, something that Taplin himself suggests.

This just goes to show how quickly the ground is shifting. I now have a piece coming out in the New York Times that explores the idea of breaking them up, but when writing the book, I tried to be reasonable. I thought no one would buy the idea of breaking them up. And now people are raising that idea.

While that’s a start there’s vastly more that needs to be done from bankruptcy reform – the last 40 years have seen governments make it harder for small businesses and households to seek financial protection – through to intellectual property reform.

Generational change may turn out to be the solution though as the lucky generation of business and government leaders – those born between 1935 and 55 – responsible for the ideology and policy that allowed such an accumulation of corporate power move on.

Apr 212017
 

Every tech boom has its excesses and it’s hard to go past the Juicero as the most egregious of today’s mania.

A number of high profile investors, including Google’s venture capital arm, have poured $120 million dollars into the internet connected device that squeezes juice from pre-prepared pouches of pulped fruit and vegetables.

Bloomberg found the devices don’t a great deal as the juice can be squeezed out of the packs by hand, which is just as well given the microchipped pulp containers can be disabled by the manufacturer.

While the Juicero aims to be the juicer equivalent of the Keurig coffee capsule, the device’s expense, built in obsolescence and unnecessary waste is emblematic of everything  that’s wrong with the current Silicon Valley culture.

The fundamental question of any business idea is ‘what problem does this solve?’ It’s hard to think of anything the Juicero fixes.

Apr 202017
 

It’s been another big year for Xero after the company passed its million user milestone, at the recent AWS Summit in Sydney founder Rod Drury to spoke to Decoding the New Economy about what’s next for the company and for small businesses.

For a company founded a decade ago, having a million paying customers is a substantial milestone and one Drury seems quite bemused by.

“It hasn’t really sunk in yet. When we did our IPO our promise was a hundred customers and I can remember when it was our first year our target was twelve hundred customers – I think we got to 1300 – so to pass a million is pretty nuts.

“What we’ve found is the accounting software market is probably one of the key industries where you’ll see the benefits of machine learning and AI. The reason for that is massive amounts of data but a pretty tight and structured taxonomy so we processed 1.2 trillion pieces of data in the last 12 months so the graph of data is huge.”

Far more modest volumes of data threaten to overwhelm smaller businesses and this is where Drury sees Artificial Intelligence and machine learning as essential for simplifying services and driving user adoption.

“One of the challenges is that small businesses might be great landscape gardeners or plumbers but they are terrible at actually coding transactions so we’re now seeing that wisdom of the crowd and all that data that we can code better than most normal people can. So the big epiphany was ‘why don’t we get rid of coding?’

“Effectively all a small business has to do make sure things like the data of the invoice is in the system and we can do the accounting for them and the accountants can check and see what’s going on.”

This automation of basic accounting tasks, and how these features are now embedded in cloud computing offerings, is changing how businesses – particularly software companies – are operating.

“You can’t run domestic platforms any more, because every accountant will have customers that are exporting and what we’re seeing now is global platforms connecting together so, for example, HSBC announced its bank feeds and what we’re doing with Stripe and Square.

All of the accountants need to be coaching the small businesses exporting. That’s what creates jobs.”

That global focus of business is now changing companies grow, particularly those from smaller or remote economies like Australia and New Zealand.

“What we’re finding now is the last generation of the late 90s and early 2000s was very much enterprise technology and normally companies would get to a certain point and then a US public company would have to buy them.

“Now we’re seeing truly global businesses that aren’t selling out quickly they’re actually creating businesses from this part of the world. People don’t have to live in Silicon Valley anymore, they can live in Sydney’s Northern Beaches or Auckland or Wellington and do world class work.

That remoteness is something that challenges Xero though as the company tries to get traction in the US market which is dominated by Intuit and fragmented across regional and industry lines.

“As you start off as a company listed in Australia and New Zealand it’s harder as you don’t get the benefit of the density in a smaller market. Now we’ve done enough to get these bank deals, we can now attract executives of the calibre that feels like long term leadership and that’s the benefit of doing the hard yards for a few years.

We’re past the beach head phase now and now we’re building the long term business. We want to be a big fish in a small pond.”

Overall Drury sees the cloud, particularly Amazon Web Services, as being one of the great liberators for business as smaller companies follow Xero’s footsteps.

“This is one of the amazing things AWS have done, they’ve created this flat global playing field.”

Mar 302017
 

Thinking about design and getting to market should be a priority for startup businesses says Murray Hunter, founder of Sydney’s Design + Industry.

Having won over 160 design awards during 30 years of running Design + Industry and employing 50 specialist designers and engineers in his Sydney and Melbourne offices, Murray has many insights in what makes a successful product.

“Some of those companies have gone on to become world leaders, it’s a hell of ride and it’s a fabulous relationship where 15 or 20 years later you have a client relationship that’s dominating the world.” he recalls.

Thinking like designers

The current startup scene in Australia provides an opportunity for the country, Murray believes.

“We’re losing manufacturing industry but there’s a whole new wave of businesses and startups based around new technologies, particularly around IoT”

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“The world wants to think like designers and lead by innovation, which is a really interesting line. You have the American government that wants to design think and you have all these large accounting firms that want to be design thinkers as well.”

“But everyone wants to be innovative and provide a better experience to the customer and we have all these new technologies that are giving us the ability to have a lot more information, be more informative.”

“It started with Apple with the iPod and then the iPhone and it’s led right through so we now have high expectations of what we want for products and services.”

Finding funding

His advice to startups is blunt, “the first thing you need is funding, If you don’t, start the process of development sufficient to develop collateral which enables you to gain investors.”

The development process itself starts with knowing the market.

“Products should be designed to suit the market, not on a hunch,” he says. “So you start with what the market wants and you go backwards. You don’t get dressed and say ‘where are we going’, you find out where you’re going and then get dressed.”

“The intelligent and qualified entrepreneur will have a lot of the problems solved, they’ll have done research, they’ll have knowledge of the market, they’ll know the segments it’s aimed at and quite often they’ll have route to market realised.”

BlueAnt Pump HD earbuds

“Crowdfunding makes a big difference as entrepreneurs can run a crowdfunding campaign, get initial sales and worldwide recognition for it. If it isn’t successful, that could be the end of it. Others know people who can fund it.”

“They may not have funding or they may, we have quite a few suppliers around us who will help with the funding process. We also know private individuals with deep pockets who are interested in investing.”

Changing the design industry

Over the past few years, the design industry has changed dramatically with the rise of Computer Aided Design, 3D printing along with new materials and manufacturing methods. Medical devices are one area that’s seen a rapid change.

“Thirty years ago medical products were low volume,” Murray recalls. “In Australia typically we’d make them out of sheet metal. Now the volumes have increased because the world is more easily accessed so we’re designing for higher volumes.”

CliniCloud non contact thermometer

“We’ve also got low cost manufacturing sources to provide solutions so we can develop a more sophisticated product that will be better received worldwide.

“The biggest change I think has been CAD (Computer Aided Design), the Internet and 3D printing.”

“CAD because we went from 2D drawing to 3D models, the internet because we no longer send DVDs or CAD files to our manufacturing partners and it means we can access manufacturers all over the world.”

“We’re working on a 3D printer that can make biomatter, in other words skin, there’s talk of doing teeth with the rigid externals and soft nerves. So where we go I can only think of organs, prosthetics, replacing cartilage which is a big thing for the elderly.”

Mar 162017
 

What has gone wrong with Australian innovation? For a nation so wealthy, it’s remarkable how poorly the country performs globally in terms of bringing new products or technologies to market.

At Ad:Tech Sydney yesterday, The Great Australian Innovation Fail panel discussed what has gone wrong and what can be done to get the nation back to a position more in line with its comparative affluence.

Boasting a range of digital media veterans and startup founders, the panel was far from a group of muttering naysayers. Although all but Fleet Systems’ Flavia Tata Nardini were distressed at the failure of Australia’s innovation agenda and the country’s general disdain for new businesses and technologies.

Michael Priddis, the CEO of research and development consultancy, Faethm,  pointed out that automation and artificial intelligence are not the future but the present and the job losses are happening now across industries.

Caitlin Iles, founder of XChange, added that she believes the estimates of nearly fifty percent of Australian jobs being lost to automation are actually understating the effects and it’s more like 90% – “a doomsday statistic” – which is something that Priddis endorsed in observing how the mining industry has automated in the past decade.

The employment shifts are being ignored by governments, says Beanstalk Factory’s Peter Bradd. “They have to get their heads out of the sand. We need to be supporting workers in threatened jobs to reskill. That’s just not happening at the moment.”

Australia’s underperformance is stunning when you consider tech startup exits, says the Information Industry Association’s Tony Surtees. Unsurprisingly Silicon Valley dominates the global statistics with over 47% of the global value with London, Los Angeles and Tel Aviv following. Sydney was at the bottom of the table with only .01% of value.

The value of exits is a problem, but that is more about the capitalisation of startups and may be changing. A bigger problem lies in how Australia’s corporate sector innovates and engages with new technologies.

Corporate Australia’s failure to engage is shown in the OECD ranking the country at 81st globally in ‘innovation efficiency’, while the nation is tenth in inputs it fails dismally in applying those inputs into outputs.

This is reflected in corporate Australia’s failure to compete globally outside the mining sector. Basically Australian executives have little desire in international markets and most have no interest in engaging with researchers, universities, innovators or entrepreneurs.

“People don’t like to collaborate,” says Peter. “They want to keep everything to themselves.”

“The CEOs of Australia’s top twenty companies need to get together with CSIRO and the universities and fix this problem. There’s money on the table.”

Whether Australia’s business leaders are prepared to pick up that money, or they’re happy and comfortable with their lot is probably the question of whether Australia can start to pull its weight in the innovation stakes.

“In ten or fifteen years we’ll be screwed if we don’t,” concludes Michael.

Mar 032017
 

“When is the government going to build a startup hub in the Hills District?” Asked one of the audience following the Meeting The Future Head-on panel.

The question was directed at Karen Borg, the head of Jobs for New South Wales, whose marquee program is the establishment of a startup hub in central Sydney.

It’s not an unexpected question, placing a taxpayer funded project in the heart of the city risks raising the ire of suburban and regional voters who perceive the less advantaged areas being neglected while the rich are favoured.

The limits of government

Of those areas in Sydney and New South Wales, the Hills District is far from the poorest or disadvantaged at all so the question is how can an affluent community establish itself as an digital, or industry, hub.

It’s likely the government won’t have much influence in what areas will become hubs, Silicon Valley’s success was largely an unintended by-product of massive cold war and space race spending while most other regions have been more due to the accessibility of suitable skills, raw materials and transport links.

So the obvious answer to the question was ‘don’t wait for government’. Which leads to asking what can communities do when they want to create a digital community.

Understand what you have

The first step is to identify the strengths your community has. Which business are doing well and what does the region have in the way of education, major industries, logistics and communications?

It’s hard, if not impossible, to build an industrial centre from scratch – and rather pointless if no-0ne in your community doesn’t have the skills or inclination – so knowing what you have is essential.

Having mapped out the landscape and understood where your community’s strengths lie it’s time to start talking.

Get everyone talking

Once you understand who are the leaders, who has the skills and who has the capital in your community, it’s time to get them talking.

A key lesson in setting up the Digital Sydney initiative was that many of the groups didn’t know of the others’ existence so one of the key aims of the project was to let the industry find out about each other.

Stimulating the growth of local networks is probably the easiest things a community can do to build a local industry hub.

Find a focal point

Having a place to get together helps build that community, this is where local governments and chambers of commerce can come into play.

Bringing the broader business community into the conversation has the benefit of widening the base and getting local services companies – the web designers, accountants, lawyers, etc – into the emerging sector which in turn grows the ecosystem.

That focal point doesn’t have to be a massive startup or innovation hub like the Jobs for NSW project, it could be a regular event like a coffee morning, Friday drinks or a business drop in centre.

Engage the stakeholders

While governments can’t create these ecosystems, they can help. How San Francisco attracted the tech community into the city from Silicon Valley and London’s support of Silicon Roundabout are good examples.

London’s startup renaissance is an interesting case study in itself with many attributing Google’s Campus as being the catalyst for the sector’s growth.

At a local level providing an environment for collaboration and starting businesses – such as rate relief, space for events or resource centres – can help while at the the state and national level education and long term industry policies will help.

The corporate and academic sectors are important too, both with investment, skills development and supporting growth sectors.

Don’t wait for government

By definition governments are risk averse, which is not a bad thing as they are spending taxpayers’ funds, which means they are unlikely to lead these projects. As a consequence it’s up to the business community to develop the local ecosystem.

Once there are successes and a public profile, governments will follow. Often though that support will be late and misdirected.

Ultimately, it comes down to the community itself being what it wants to be – it’s up to the community to create the environment that encourages growth in whatever sector they think is right.

So stop waiting for government and start talking with your local business and community leaders about what they think are your region’s strength and vision.

Feb 202017
 

Last week the City of Sydney and councillor Jess Scully came under fire for an apparent backflip about the need for a Chief Digital Officer.

Scully, who was elected at last year’s council elections, told InnovationAus “the idea of a CDO or chief innovation officer seems a little bit redundant” a day before the organisation advertised for ‘chief, technology and digital services officer’.

To be fair to Scully, the roles being advertised by the City of Sydney were not truly CDOs in the way Brisbane, which has a small business focus, and Melbourne’s city councils have appointed them however it raises the question of whether Scully is right that an organisation doesn’t need a Chief Digital Officer.

As with most questions of this nature, the answer seems to be ‘it depends’. A key part of that discussion is where a CDO sits in an organisation. If they are senior executive or even board role, then it’s likely they are going to come into conflict with other c-suite managers such as the COO and CFO.

What’s worse, such a conflict in the c-suite can mean digital issues can be seen as ‘belonging’ to the CDO and not other key business units, which can only be to the detriment of the organisation.

There’s an argument too that the changes to organisations is so great from the changing economy and emerging technologies that responsibility of understanding and dealing with these changes is the role of the CEO and the board.

Where a CDO can be very effective is being an advocate for change and a trusted adviser to senior management, however even there risks lie as identified by Paul Shetler who found the siloing of agencies within the Australian Public Service meant it was very hard to effect any change in the face of resistance from an organisation’s vested interests.

It seems from the story that the City of Sydney has chosen an advocate and support role for the digital officer position, rather than formalise a CDO position who becomes a figurehead for the organisation’s digital evolution.

For a CDO or any technology advocate to be effective, there has to be support from the board and senior management. A technologist can only drive change if they have a mandate from the top.

Even then in some organisations the culture may be so factionalised that the response to change and drive for digital transformation has to come from the existing powerbrokers and a CDO could be at best a hindrance and even obstruct the process.

So the City of Sydney and Jess Scully aren’t wrong in not having a Chief Digital Officer, and neither are Melbourne and Brisbane for having one, it’s a deliberate decision by the various managements to choose the structure and roles that works best for their organisation. Driving change though always remains the responsibility of the board and the CEO they appoint.